The New “Price” of U.S. Health Care: The Future of Value-based Reimbursement Under President-elect Trump and Tom Price

The total U.S. health care expenditure was $3.2 trillion in 2015, and is projected to grow to nearly $5.6 trillion by 2025.(1) As our nation’s cost of care rises, both Democrats and Republicans recognize the overwhelming need to control health care expenses while maintaining and improving quality of care. Under the Obama administration, the Department of Health and Human Services (HHS) pledged that by 2018, half of traditional Medicare payments would be based on value-based payment models that incentivize high quality, low cost care as opposed to payments based upon volume.(2)

In theory, a value-based payment scheme that transforms how health care is delivered by rewarding quality improvement, focusing on patient health outcomes, and reducing unnecessary costs, is non-partisan. Yet, the ways in which Republicans and Democrats seek to attain the goal of high quality, low cost care differ.

Value-based Reimbursement Under President Obama

Over the last few years, the CMS Innovation Center (CMMI) has been a key component in the implementation of President Obama’s Affordable Care Act (ACA). Created by Section 3021 of the ACA, CMMI’s stated purpose is to innovate and test new payment models that would lower cost and improve quality for individuals who receive Medicare, Medicaid, and Children’s Health Insurance Program (CHIP) benefits. Through Section 3021 of the ACA, Congress provides the Secretary of HHS with the authority to expand innovative payment models through rulemaking, including the ability to test these models on a national basis. Thus, the ACA allowed the Obama administration to test value-based reimbursement models via rulemaking.

plays a key role in the Quality Payment Program, created as part of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), through which clinicians may earn incentive payments by participating in Advanced Alternative Payment Models. Payment methodologies that qualify as Advanced Alternative Payment Models under MACRA are determined by CMMI.

Although most CMMI payment models under President Obama have been voluntary, several recent CMMI initiatives mandate participation. One such initiative is the Comprehensive Joint Replacement program, which required certain hospitals to share a single bundled payment to cover the cost of certain joint replacement procedures, including in-patient and post-operative care. A similar mandatory project is set to take effect soon for certain cardiac care episodes. In both mandatory programs, hospitals are required to assume downside risk, which means they must pay Medicare if costs exceed a set threshold. The implementation of these mandatory value-based payment initiatives has sparked increased criticism of CMMI. Republicans have argued that HHS is overreaching its power by mandating these payment programs.

Value-based Reimbursement Under President-elect Trump and Rep. Price

President-elect Donald Trump’s selection of Representative Tom Price (R-GA), an outspoken critic of CMMI, as his nominee for incoming HHS Secretary came on the heels of the Centers for Medicare & Medicaid Services’ (CMS’) release of the much- anticipated MACRA final rule, which, as part of its greater effort to advance CMS toward value-based payments, transitions Medicare away from a volume-based fee-for-service system to a value-based system.

Back in September, Price joined fellow GOP lawmakers to ask CMMI to “stop experimenting with Americans’ health, and cease all current and future planned mandatory initiatives.”(3) Price wrote, “CMMI’s mandatory demonstrations could potentially harm patients and providers because CMMI is making participation in the demonstrations mandatory, rather than voluntary, before we know how they will affect access to care, quality, and outcomes. CMMI has overstepped its authority and there are real-life implications—both medical and constitutional. That’s why we’re demanding CMMI cease all current and future mandatory models.”(4) The letter continued: “As a result, Medicare providers and their patients are blindly being forced into high-risk government-dictated reforms with unknown impacts […] Any true medical experiment requires patients' consent. However, patients residing in an affected geographical area will have no choice about their participation.”

Price is not alone in believing that the ACA gives the head of HHS too much authority to create and expand Medicare and Medicaid payment models. In a letter to Andy Slavitt, Acting CMS Administrator, the American Hospital Association also expressed disapproval of CMS’ proposal to expand these mandatory bundled payment models.(5)

Throughout his campaign, President-elect Trump reaffirmed his disdain for the ACA and pledged to repeal it. President-elect Trump’s website addressed the issue of health care reform as follows:

“A Trump Administration will work with Congress to repeal the ACA and replace it with a solution that includes Health Savings Accounts (HSAs), and returns the historic role in regulating health insurance to the States. The Administration’s goal will be to create a patient-centered healthcare system that promotes choice, quality and affordability with health insurance and healthcare, and take any needed action to alleviate the burdens imposed on American families and businesses by the law…. With the assistance of Congress and working with the States, as appropriate, the Administration will act to: […] Modernize Medicare, so that it will be ready for the challenges with the coming retirement of the Baby Boom generation – and beyond.”(6)

Yet, the question remains: How would repeal of the ACA affect the shift to value-based reimbursement?

With Republican control of the presidency, House, and Senate, the incoming Trump administration is likely to pursue solutions that decrease the role of the federal government in defining regulatory requirements and mandatory programs, and increase the role of the legislature, states, and private sector.

Some have speculated that President-elect Trump's stated intention to “repeal and replace” the ACA, regardless of whether it comes to fruition, is unlikely to fully eliminate the American health care system’s steady movement toward value-based payment.(7) However, it is undeniable that the ACA’s full repeal would effectively cripple many of the current value-based payment initiatives and mandatory programs, especially given that CMMI derives both its mission and funding from the ACA.

As the transition from one administration to another approaches, health policy experts are making predictions. Joseph Antos, a fellow at the conservative American Enterprise Institute, has observed that under the Obama administration there has been “a fundamental shift from Congress to the executive branch in the ability to set policies for some of our nation's most important and costly public programs.”(8) Antos further stated in an interview, “I can’t imagine a Trump administration saying we want the bureaucrats to decide on the health care your grandmother is going to get […] Anything that is that much of a marquee issue absolutely has to go through Congress.”(9) However, Blair Childs, senior vice president of the health care improvement company Premier, projected in an interview that “calmer heads” would likely prevail when Trump assumes the presidency, and that “CMMI will in the end survive” in order to meet the need of a “mechanism to test and scale new models in fee-for-service Medicare.”(10) In early December, at a summit on population health strategy under the new administration, former HHS Secretary Michael Leavitt stated, “CMMI will be challenged, but the analytics it provides are important to maintain […] we need to find the balance between provider readiness and the speed to change between providers and payers […] the GOP is not in lockstep […] the bottom line is we don’t know.”(11)

To date, it is certain that the shift from volume-based payment to value-based payment has taken considerable resources, not only on the part of government, but also on the part of providers. The future of value-based payment is unknown; but, a full repeal of the ACA would have dramatic consequences.

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